The war of Amazon, Apple and other near-monopolies

The two retail behemoths, one the king of the physical store and the other the conqueror of the online world, are battling over e-commerce.By Megan McArdle

Amazon has announced that it will stop selling Google Chromecast and Apple TV devices at the end of the month. Why? Because these devices don’t fully work with Amazon’s streaming video service. Amazon is apparently willing to anger some of its customers in order to deliver a competitive edge to its own streaming services.

We’ll get to the morality and wisdom of this move in a minute, but let’s stop to note that this is yet another skirmish in a long battle between the tech giants of our era. Four companies — Amazon, Facebook, Google and Apple — are all jockeying to control as much of our technology experience as possible. A legal expert that I interviewed a few years back called it “the war of the APIs,” but it goes well beyond that. Each company is trying to leverage the dominance it has in one area to push into as many other areas as possible while simultaneously trying to undercut the other firms that are already there.

So when Apple announced that its mobile devices would finally permit adblocking apps, that was a win for consumers — and also a blow for Google, which makes its money off of those ads. Google, of course, has already challenged Apple where it makes its money, on pricey mobile devices. And now Amazon would like to force both of those behemoths to support its streaming video service — or steer consumers toward devices, like Roku, which already do.

This is exactly the sort of activity — leveraging a quasi-monopoly to gain dominance in another market — that caused the US justice department to go after Microsoft in the 1990s. And indeed, one already hears rumblings about applying net neutrality rules to content providers (providers who, ironically, supported net neutrality as a way to keep cable companies off their turf). If Comcast can’t give preferential treatment to XFinity over Netflix, then why should Apple TV be allowed to favour iTunes content over Amazon Video?

You could see Amazon’s actions as an argument for vigorous government action. The company is increasingly a one-stop shop for many people, and knocking the Chromecast and the Apple TV off of its product listings will unfairly advantage its own offerings. And yet, I actually think that this move shows exactly why government intervention isn’t needed. Each of these companies has ample weapons at its disposal to fight the coming battles. Each is dominant in one area — and yet still under considerable competitive threat from the others. Google and Apple could keep Amazon’s applications out of their mobile stores, for example, which would deal a severe blow to Amazon’s sales.

That does not mean that this move is smart. For one thing, regulators might decide that their intervention is required. For another, Amazon’s market power comes from the fact that it is a one-stop shop. Refusing to carry popular devices might deal a mortal blow to those firms — but it might also alienate customers, weakening the very power it is trying to leverage. This was the sort of thing that Microsoft could get away with when it was essentially the only game in town. But with other mighty tech giants roaming the land, an aggressive offense can end in disaster.

All that said, you should expect a lot more of this sort of thing in the future, precisely because all of those giants watched Microsoft decline from the undisputed emperor of the realm into a brooding mid-life crisis as its core product became increasingly irrelevant. No one wants to get stuck in what used to be a great business; they want to make sure that they have a big slice of the Next Big Thing. And if they have to step on a few toes to get there, they will — whether those toes belong to their competitors, or their customers.